China Galaxy Securities: Large potential space in volume and price, optimistic about the development prospects of AI tools.

China Galaxy Securities released a research report stating that domestic AI tools, relying on the user base accumulated in the early stage, combined with continuously improving penetration rates, are expected to achieve sustained growth in commercial value in the process of technological iteration and market expansion, becoming an important force in the global AI application market. With the continuous iteration of underlying large model capabilities, current AI applications have initially possessed the technological foundation for development. The continuous exploration of AI in various industries will have a transformative impact on most industries. Among them, the acceleration of commercialization progress in the media sector is more obvious, observing that overseas AI technology started earlier and commercial applications have matured, which provides some hints for domestic application investments. The main points of view of China Galaxy Securities are as follows: Review of the US stock AI market: Driven by multiple resonances in terms of macro, technology, application, performance, and fund levels, the upward trend of the US stock artificial intelligence industry is more pronounced in 2024, showing a significant excess compared to the NASDAQ index: as of July 16, 2025, the US stock AI sector has risen by 80.19% since the beginning of 2024, while the NASDAQ index has risen by 38.47% during the same period. Against the backdrop of the NASDAQ index hitting a historic high in July, the AI sector still shows a significant excess return relative to the NASDAQ index. Accelerated domestic catching up, building a closed-loop AI development ecosystem: The uncertainty of international situations such as tariffs may temporarily hinder cooperation in the AI field between China and the US. However, in the long term, China is expected to build a more complete industrial chain and accelerate the process of independent innovation (such as chips, basic software). 1) Efficiency revolution in computing power: The reduction in model inference costs led by DeepSeek will drive AI from being "exclusive to data centers" to "ubiquitous in terminals," breaking foreign countries' blockade on cutting-edge computing power. 2) Policy-driven advantages and application scenarios: China has the world's largest application market. With a massive number of end users participating, the development of the AI ecosystem is expected to form a "technology-talent-user" triangular closed loop. Great potential for quantity and price, optimistic about the development prospects of AI tools: Currently, domestic AI tools are rapidly occupying the market with a low-price strategy, cultivating user habits. This path of "low-price acquisition of customersfunction optimizationvalue upgrade" follows the common development logic of Internet products and provides the possibility for long-term profitability. The vast population base and digitization demand in China provide fertile soil for AI tools. As AI technology becomes more widespread, more users will shift from basic functions to advanced AI applications, further improving penetration rates. The bank believes that domestic AI tools, relying on the user base accumulated in the early stage and combining continuously improving penetration rates, are expected to achieve sustained growth in commercial value in the process of technological iteration and market expansion, becoming an important force in the global AI application market. Risk warning: Risks related to the policy and regulatory environment, risks of AI technology development falling short of expectations, and risks of AI application landing falling short of expectations.